Bitcoin (BTC) Indicator Retests Level That Has Historically Dictated Bearish vs. Bullish Momentum

On-chain data shows a Bitcoin indicator is currently retesting a level that has historically acted as a boundary line between bearish and bullish momentum.

Bitcoin Short-Term Holder SOPR Retests 1.0, Signaling Key Price Trend

A new analysis by on-chain analytics firm Glassnode highlights a crucial retest in Bitcoin's Spent Output Profit Ratio (SOPR) among short-term holders, offering insights into the prevailing market sentiment.

In a recent post on X, Glassnode discusses the significance of the SOPR, an on-chain metric that indicates whether Bitcoin investors, on average, are selling or transferring their coins at a profit or loss.

When the value of this metric is above 1, it suggests that the average holder of the asset is selling at a net profit, while a value below this threshold indicates that the overall market is realizing a net loss.

Specifically, the analysis focuses on the SOPR of short-term holders (STHs), defined as those who purchased their Bitcoin within the past 155 days.

According to Glassnode, the 7-day moving average (MA) of the Bitcoin STH SOPR has been retesting the 1 level recently.

“This metric, when adjusted for time preference, highlights the price investors paid for the coins being moved, signaling whether a cohort is underwater or not,” the firm explains.

“Historically, breaking above 1.0 confirms a shift in momentum, while failure to do so often leads to renewed sell pressure.”

The 1 level is a critical psychological boundary for STHs, who are known to be more sensitive to price movements and market shifts.

These investors, by definition, are those who entered the market recently or those who are not willing to hold their coins for extended periods, making them more susceptible to panic selloffs.

When the STH SOPR rises to the 1 mark, it signifies that these investors, who were forced into loss-selling earlier, are able to break-even again. This can trigger a spike in selling pressure as STHs attempt to recoup their initial capital.

The last time Bitcoin experienced a retest of this level by the indicator was in January, and as evident from the chart, it managed to achieve a breakout, albeit briefly.

It remains to be seen whether the metric will be able to cross into the profit zone this time around.

At the time of writing, Bitcoin's price is trading around $94,500, down over 2% over the past 24 hours.